Life Insurance Chapter 2
An insurance policy is sold to an individual who was obviously intoxicated when the application was signed. Six weeks later the policy is approved as applied for. Several weeks after that, the insured indicates his displeasure and wishes to cancel the contract. Which of the following statements is TRUE based upon this short scenario? A. The policy is not legal and may be cancelled by the insured due to the fact he was intoxicated at the time of application. B. The insured has no recourse. C. The insured can cancel, but will have to pay a heavy surrender penalty. D. The policy is not legal because there was no agreement.
A
The term "intentional" is most often associated with which phrase below? A. Fraud B. Warranty C. Misrepresentation D. Material Misrepresentation
A
Which of the following best describes a contract that is characterized by a premium paid for coverage with no guarantee of a benefit being paid in the future? A. Aleatory B. Conditional C. Bilateral D. Personal
A
Which of the following statements addressing the concept of rescission is NOT CORRECT? A. A contract can only be rescinded by the insurance company. B. Material misrepresentation and concealment are both grounds for policy rescission. C. For rescission to occur, the concealment can be either unintentional or intentional. D. When a policy is rescinded, the entire premium is returned to the policyowner and the policy is returned to the insurer.
A
An insurance contract is created by an insurer. Any ambiguities that appear in the future will be decided by a court in favor of the insured since the policy is:
A contract of adhesion
An applicant for insurance submits, through a producer, a completed application and the initial premium. Once it is received by the insurance company underwriter, the risk is assessed and the insurer makes a counter-offer. Which of the following has occurred? A. The offer has been accepted by the insurer B. The original offer has been rejected by the insurer C. The negotiations between the prospective parties have concluded D. The contract is void
B
Delivery of an Insurance contract is an illustration of: A. The Offer B. An Acceptance C. A consideration D. An aleatory
B
In order for a life insurance policy to be legal, there must be 4 essential elements present. Which of the following is not one of the 4 essential elements needed in order to have a legally enforceable contract? A. Legal capacity of the applicant and insurer B. An individual listed as beneficiary C. Premium and application information D. Offer and acceptance
B
What word below best describes the status of a rescinded contract? A. Terminated B. Revoked C. Cancelled D. Removed
B
When one party makes a proposal for insurance, which of the following has occurred? A. Acceptance B. Offer C. Consideration D. Legal Purpose
B
Which choice below best describes the word insurance? A. The transfer of pure risk. B. The transfer of risk, particularly financial risk, over a large number or group of people in order to diversify the overall uncertainty or potential loss of the individual. C. The liquidation of funds. D. The diversification of hazards and perils.
B
A representation is a statement the applicant:
Believes true to the best of their knowledge
A life or health insurance company makes a promise to pay claims as depicted in the contract. Which term below best describes where that promise is made? A. Estoppel concept B. Probationary Period C. Consideration clause D. Waiver of Premium provision
C
An insurer approves a policy in which important health underwriting questions go unanswered. What choice below describes the process the insurer has engaged in? A. Misrepresentation B. Material Misrepresentation C. Waiver D. Estoppel
C
Each of the following must be present in order for an insurance contract to be legal and enforceable, EXCEPT: A. Offer B. Acceptance C. Competent Underwriting D. Legal Purpose
C
For a life insurance policy to be issued, consideration must be provided by the applicant. What choice below best describes an applicant's consideration? A. Premium B. Testimony C. Premium and application information D. Premium and testimony
C
In most states, a policy can be rescinded if information was concealed by either the applicant or the insurer, and the concealment was: A. intentional B. unintentional C. Either A or B D. Negligent
C
Which of the follow statements regarding a warranty is NOT TRUE? A. A warranty is a guaranteed statement. B. A warranty may be considered a promise upon which coverage is based. C. A warranty is information that depicts only past events, and never future events. D. A warranty is information that depicts past, present and future events.
C
Which of the following is a binding force in an insurance contract? A. The Agreement B. The offer and acceptance C. The Consideration D. Legal capacity
C
Which of the following is considered to be a voluntary relinquishment of a known right? A. Warranty B. Estoppel C. Waiver D. Parole evidence
C
The failure to disclose all known information best describes:
Concealment
According to state insurance law, which of the following choices would not be considered concealment? A. Information already known by either party B. Information that should already be known by either party C. Information waived by either party D. All the above answers would not be considered concealment
D
Each of the following is a characteristic of an insurance contract, EXCEPT: A. Aleatory B. Adhesion C. Personal D. Bilateral
D
Several elements must be present in order for an insurance contract to be enforceable. One required element is that all parties be competent. Each of the following is competent to enter a contract, EXCEPT: A. Minor contracting for necessities B. An insured suffering a serious illness C. An officer of an insurer D. An individual under duress
D
Which statement below regarding representations is NOT CORRECT? A. Representations are statements given by an applicant for insurance that are true to the best of the applicant's knowledge. B. Representations are made prior to policy issue. C. Representations cannot be changed once the policy is issued. D. Representations can be changed or altered at anytime
D
Which term below is not correctly defined? A. Fiduciary - generally means a position of trust, particularly with collected premium. B. Aleatory - means the possibility exists that one party to a contract may receive a larger benefit than what they themselves provided. C. Utmost Good Faith - means that both parties rely on the other party being honest and forthright with regard to information provide D. Unilateral - means a promise to be performed in exchange for an act that may or may not take place
D
Deliberate or intentional deceit by making false statements is known as:
Fraud
Intentional deception best describes:
Fraud
The materiality of an application statement is dependent upon whether the statement holds any influence in the policy __________.
Issue
When, if at all, can a representation be changed or altered?
Prior to policy issue
The statements made by an applicant for an insurance application are considered to be:
Representations
If a policy is treated by an insurer or policyowner as if it has never existed, the policy has probably been:
Rescinded
Which of the following best describes when an insurer fails to enforce a provision in an insurance policy?
Waiver
A statement made by an applicant for insurance that is guaranteed to be absolutely true and is made part of the contract is called:
Warranty
A statement made by an applicant for insurance that is made part of the contract and upon which coverage is conditioned is known as:
Warranty
